Aside from having one of the strongest financial systems, Australia is also known to have one of the best performing stock markets in the world. In this article, we take a look at some of the things that distinguish the market and how these affect the performance of the stock market worldwide.
How the Australian Stock Market Started.
The Australian stock exchange limited was formed on 1st April 1987 by the legislation of the Australian Parliament which enabled the amalgamation of six independent stock exchanges that previously operated in the state capital cities and its merging with the Sydney Futures Exchange in 2006. Surpassing 22 other equity markets around the world in U.S dollars, Australia, according to a study published by Credit Suisse Group A.G stocks has been the world’s top-performing equity market over the past 120 years. For some time now, the country has been immune to several instances of financial crises across the world due to its strong banking and saving system as well as the abundance of natural resources it enjoys. The Australian Securities Exchange LTD sometimes referred to as the Sydney Stock Exchange operates Australia’s primary security exchange.
ASX group has two trading platforms and these are the ASX Trade and the ASX TRADE24. The ASX Trade is a NASDAQ OMX ultra-low latency trading platform based on NASDAQ OMX’s Genium INET system used by many exchanges across the world. It is one of the fastest multi-asset trading platforms in the world, delivering latency down to 250 microseconds. ASX Trade deals primarily with the trading of ASX equity shares. ASX Trade24 on the other hand is ASX’s global trading platform and facilitates derivatives security trading. 24-hour trading is allowed on the platform simultaneously with two active trading days which allows products to be opened for trading, on the new trading day in a one-time zone while products are still trading under the previous days. It is globally distributed with network access points located in Chicago, London, New York, Hong Kong, Singapore, and others.
The Sydney Futures Exchange being the 10th largest derivatives in the world provides derivatives in interest rates, equities, currencies, and commodities. Currently, there are over 2,300 companies listed on this exchange with an increasing monthly volume of over $76 billion. The Australian foreign exchange market is the 7th largest in the world in terms of global turnover while the Australian dollar is the 5th most traded currency. It comes as no surprise that ASX is one of the top listed exchange groups in the world given that it has a daily turnover of about $4.68 billion and a market cap of $16 billion. Products and services available on ASX include shares, exchange-traded options, futures, warrants, contracts for difference, exchange-traded funds, real estate investment trusts, listed investment companies, and interest rate securities.
Since October 1988, more than 2000 companies have been listed on the ASX through IPO. IPOs or Initial Public Offerings have been very fundamental to Australia’s 6.6 million share investors. Shares were purchased through the privatizations of Telstra Corporation, Commonwealth Bank of Australia, and Qantas Airways in the 1990s. Collectively, these companies raised about $170 billion from large and small investors. The Australian Securities Exchange in 1998 became the world’s first exchange to demutualize and list directly on its exchange. Having the 4th largest investable pension pull has made Australia and ASX in particular, attractive to IPOs.
In the Australian market, shareholders in a company are entitled to shares in the company’s earnings. These are paid in the form of dividends usually twice a year. Several Australian companies also distribute what is known as franking credits. These are tax rebates that shareholders receive when a stock pays franked dividends because the company’s profits have already been taxed at the corporate level. For certain-low tax investors and retirees, franked dividends are especially tax-effective. Equities in Australia have also been a premium asset class for some time now. If an initial investment in the ASX of about $100,000 was made in 1980, an annual dividend income of $80,000 will be earned currently. Despite financial downturns, the Australian economy has proved to be one of the most resilient in the world in the past few years.
Australia was ranked 5th out of 57 of the world’s leading financial systems and capital markets by the World Economic Forum Equity Market as well as the 8th largest in the world based on free-float market capitalization and the 2nd largest in the Asia Pacific. Additionally, it has the 3rd-largest debt market in the Asia Pacific with the largest fixed income derivatives in the Asia Pacific region. Some of the best ASX shares to buy include Medical Developments, Catapult Group, Tassal, Gale Pacific, Southern Cross Electrical, and Capral. Tassal is Australia’s largest producer of salmon with a market cap of $814 million whiles Catapult Group with a market cap of $411 million is a sports analytics specialist that produces video analytics technology, monitoring devices, and software for elite athletes. The Southern Cross Electrical company is a service company focused on providing large-scale specialized electrical, control, and instrumentation installation and testing services for the resources, commercial, infrastructure, defense, and industrial sectors. The ASX oversees financial compliance in the ASX markets and promotes corporate governance markets including bond markets, derivatives markets, and equity markets. Over the years, ASX has placed a premium on educating visitors on its website and ensuring that resources are made available for understanding the public markets and exploring different class assets.
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